Buying - Karen's Perspective

Guest Post: TRADE UP! 5 Reasons why this is the BEST market to upgrade!

Many thanks to Daniel Dima Batsalkin for this article. I found it on his site and asked his permission to re-post it here.

Have you thought about getting that bigger, better house in a better neighborhood? Well, I agree with Daniel that now is the best time. Prices are down and extremely negotiable, selection is huge, and interest rates cannot possibly stay this low for much longer.

Many people are concerned that they will loose money on their current home if they sell now. Daniel will tell you what’s wrong with that argument. I add to his comment that you may want to consider renting your current home rather than selling it. My husband and I just traded up in a big way over the summer. Rather than take a loss in this market on the home we were leaving, we signed a lease option agreement with people who could not qualify at this time for a loan. The profit we’re making there helps to offset the increase in our new house payment. There are always options.

If you don’t know what your options are, ask me here!

And now, enjoy Daniel’s post:

12 / 17 / 2009
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USDA Offers 100% Financing

We recently bought a home, renovated it and put it back on the market all within a month. Just 12 days after listing it, we accepted an offer. Why so quickly in this “difficult to sell” market? One reason may be that we were able to advertise it as qualified for USDA financing. What is USDA financing?

The United States Department of Agriculture offers home loans funded directly by the Government for certain properties. These loans are available for very low and low-income households. Qualified buyers are entitled to 100% financing for their purchase.

In order to be eligible for most USDA loans, households must meet certain income guidelines. Also, the home to be purchased must be located in an eligible rural area as defined by the USDA.

These USDA loans, Section 502 loans, are primarily used to help low-income individuals or households purchase homes in rural areas. Funds can be used to purchase an existing dwelling, purchase a site and construct a dwelling, or to purchase newly constructed dwellings located in rural areas. Mortgage payments are based on the household’s adjusted income.

There are other requirements such as:

Acceptable credit history
U.S. citizen or qualified resident alien
Owner-occupant
Additional lender requirements

but with the possibility of 100% financing, shouldn’t you find out if a USDA program will work for you?

10 / 19 / 2009
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Owner Financed Homes Qualify for $8000 Tax Credit

There’s a lot of action going on with the $8000 tax credit and we’re getting lots of questions concerning whether or not our Agreement for Deed qualifies.

“Yes”, is the answer! We close with an attorney and submit a HUD-1 with the buyer’s tax return so the return can be amended.

The following comes from the IRS web site:

Q. Can a taxpayer claim the first-time homebuyer credit if the purchase is pursuant to a seller financing arrangement (for example; a contract for deed, agreement for deed, installment land sale contract, or long-term land contract), and the seller retains legal title to secure the taxpayer’s payment obligations?

A. If the taxpayer obtains the “benefits and burdens” of ownership of a residence in a seller financing arrangement, then the taxpayer can claim the credit even though the seller retains legal title. Factors that indicate that a taxpayer has the benefits and burdens of ownership include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property. (New 7/2/09)

So, if you’re in a lease-to-own situation, you may be able to give the owner a nice downpayment that enables them to owner-finance and qualify you immediately for the $8000 tax credit.

*Start owning today!

09 / 29 / 2009
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First Time Homebuyer Questions

My son and daughter-in-law are in the process of buying their first home (they want that $8000 tax credit!) and they’re asking some really great first time homebuyer questions. I thought I’d repeat some of our conversation here:

No seller really expects a full price offer, not in this economy anyway. The past national average was that offers came in 3%-5% below asking price. Now experts say the average national discount is about 10%. Sellers are not surprised when you offer less than they’re asking.

6% real estate commission is the norm in most states. If you buy from a for-sale-by-owner, you can use this to reduce your asking price since, if you buy their home, they won’t be paying that commission. The seller knows this will be a cost if they list the property and they expect to pay some commission if a Realtor brings them a buyer.

Closing costs. Both buyers and sellers pay some and can negotiate who pays what. In North Carolina, typically what the buyer pays includes:

09 / 20 / 2009
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New Things to Consider When Buying or Selling

Buying or selling a home? Have you done it before? Well, it’s a whole new world…

Buying? Today, lenders are going to ask you for more money up front (20% of the purchase price or even more), higher credit scores (720?) and proof of your income. Remember what we called “liar loans” where you didn’t have to prove that you had a job or even an income? Those days are gone.

No more “sub-prime” loans where people who should never have qualified in the first place got loans on homes they could never afford. In 2005, one in every five mortgages was considered sub-prime. This year, it’s less than 1 percent.

Another category of risky loans, Alt-A mortgages, which required little or no documentation of the borrower’s finances. They’re down to $3 billion this year from $400 billion in 2005.

Easy to get mortgages? Gone.

09 / 11 / 2009
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$8000 Tax Credit is set to expire – Are You Ready?

Ok, so you want to buy a home, especially now, since you may qualify for that $8000 tax credit. What should you be doing? The time is running out so, hopefully, you’ve already started the process.

If you haven’t done so already, contact a mortgage lender or bank to find out if you qualify and for how much. The lender will pull your credit or have you pull your credit to find out your credit score. Then, they will evaluate any credit issues you may have and tell you what you need to do to resolve them. Some issues take months to resolve.

Hopefully, you’ve already been reading the information here about credit and have been working on preparation to buy.

The point I want to stress here is that it will take, on average, 2-3 months to close your loan once you have applied. Count the days! The $8000 tax credit is set to expire on December 1 and we are already well into September. Even if your credit is good, you must hurry and work closely with your lender if you hope to close your loan before the deadline.

Start today. If you have questions, contact your lender or email me here. Good luck!

09 / 06 / 2009
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City Live/Work Incentives

Have you checked to see if your city has any live and/or work incentives? Cities need for you to live and work in them because you pay the bills and generate tax revenue for wherever you live. In this economy, many cities are beginning to compete, not only for industry, but for population. There just may be incentives to live where you want.

St. Louis Park, Minnesota, has just such programs. The population is 47,000 and St. Louis Park is located just 10 minutes from downtown Minneapolis. If you work for a local business there, you qualify for a $2500 loan toward buying a home and an additional $1000 if you buy a foreclosure. Don’t like that it’s just a loan? Stay in the home for at least 3 years and the loan is forgiven! Great way to improve their economy and sell distressed properties!

The City of Cleveland offers residential tax abatement on newly constructed and rehabilitated homes in all 36 neighborhoods. A newly constructed home in Cleveland receives 100 percent, 15-year tax abatement for construction of the home. Rehabilitated properties receive a 100 percent, 10-year abatement on the increased value of their property after the work has been completed.

As an example, a $150,000 home without the tax abatement pays $2970 per year in tax. With the abatement, they pay $594 for a savings of $198/month!

08 / 31 / 2009
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Marketing – How Effective is Yours?

Need customers? Whether you’re trying to buy a home or sell your house, the answer is a resounding “yes”. If you don’t understand that, it could be the reason you’re not finding what you need.

Do buyers know your house is for sale? Is there a sign in the yard? With a phone number that someone answers and a web site that is monitored regularly? Is your property listed on the MLS, with fabulous photos and an outstanding description of the most desirable features? Is it in the newspaper in an ad that stands out from the others? Is it on all the free on-line listing sites (and there are a TON of them)? Have you put out flyers, talked to your neighbors and co-workers about it? Offered a finder’s gift if someone refers the person who buys your home? What have you done above and beyond the usual that makes your property get attention? Why would someone find you in the haystack of for sale homes?

07 / 28 / 2009
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Pre-qualification vs. Pre-approval

A pre-qualification is a relatively easy to obtain and not very valuable initial evaluation of your credit worthiness as a potential borrower. It is typically used to determine the estimated amount you can afford to borrow. Pre-qualification looks at your income and expenses in order to generate an estimated borrowing range that you should be able to repay to a lender.

A pre-qualification amount is not a guaranteed amount that a financial institution would approve. It is simply an estimate that gives you an idea of what you can afford to purchase.

To pre-qualify, a loan officer will take some of your information (employment, income, assets, current debt) and make a tentative decision without verifying any of it. Typically with a pre-qualification, you won’t even give your social security number so there is no credit check.

07 / 24 / 2009
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Questions to Expect when Applying for a Mortgage

Planning to buy? Get your information in order before approaching a lender.

Any lender will first and foremost want to know about your employment and income
• Where do you work?
• How much do you make?
• How long have you been at your job?
• Is your income steady or irregular?
• If irregular, you may need to provide more details to obtain a favorable interest rate.
(Self employment will open up a different set of questions and income verifications.)

Outstanding debts
• What recurring debts do you have?
• How much do you owe on those?